Loop Office Owners Reneged On Sale Deal, State Says

Illinois Paid Millions In Extra Rent, Lawsuit Charges

For years, the giant Sears store was a symbol of a bustling retailer for Chicago's State Street.

But now, the building at 401 S. State St. has come to symbolize something much different: How developers can reap millions by leasing office space to state agencies that opt to enter into long-term lease arrangements instead of outright building purchases.

On Monday, the state sued the building's owners-a partnership-and asked a judge to void the lease that the state signed in 1985 to rent office space for the Illinois Department of Employment Security.

The suit, filed in Cook County Circuit Court, said the lease contained a clause allowing the state to buy the structure in 1992 for its appraised value, currently estimated at $26.7 million.

But the suit contends the owners balked at selling the building when the state tried to exercise the purchase option. As a result, the suit said, the state has unnecessarily paid millions of dollars to rent part of a building it could have purchased outright in the summer of 1992.

State officials estimate that figure at $4 million to $8 million.

The original lease and purchase option apparently were intended to be a financial plum for the politically connected building owners, according to interviews and court documents.

Under the lease, the state has paid nearly $39 million in rent to a partnership that bought the building in 1982 for $6.3 million, according to state and county records.

"Being unable to exercise our purchase has been a bad deal for the taxpayer," said Stephen Schnorf, director of Central Management Services. "We are paying twice as much to occupy the building as we should have."

The suit was filed Monday after nearly two years of haggling with Anthony Antoniou, who heads the real estate partnership that owns the building.

Antoniou, a DuPage County-based real estate developer who has helped finance political campaigns of Gov. Jim Edgar and former Gov. James Thompson, has demanded the state pay $50 million to buy the building, although independent appraisers value it at about $26.7 million.

In 1991, while seeking a property tax cut, Antoniou's attorneys argued that the building was worth $24.5 million.

The lease that moved Employment Security to the Sears building was negotiated after angry state legislators charged that taxpayers had been "ripped off" in a decadelong lease of a Michigan Avenue high-rise for $18 million-though the building ultimately sold for $2.3 million.

The landlords on that deal were political insiders allied with the administration of Gov. Dan Walker, a Democrat.

Details of how Antoniou and the partnership subsequently wound up with the lease are contained in a separate lawsuit, since settled out of court, between Antoniou and Victor J. Cacciatore Sr., a real-estate broker.

According to documents in that case, Antoniou said he was contacted by Cacciatore employees five months before the state even advertised in 1984 that it was seeking a new home for Employment Security.

Antoniou said he later met with Cacciatore, who offered to help land the state as a tenant, according to court records. Antoniou later charged that Cacciatore's real-estate firm fraudulently represented it was acting as the state's broker in the deal.

Even so, according to the lawsuit, Antoniou agreed to pay Cacciatore a fee for the lease that would be at 1 1/2 times the standard commission, if the state signed a lease on the building. An exact amount was not specified.

But afterward, Cacciatore sued to collect the fee he said Antoniou had refused to pay.

In response, Antoniou contended that Cacciatore had been leaked inside information that Employment Security was seeking new space, a violation of the state's administrative code. His lawyers also contended Cacciatore brought in William Cellini, a powerful Downstate Republican, to help consult on the deal and to ensure it would go to Antoniou.

Cacciatore and Cellini, a former state transportation director, have longtime political ties to state contracts and lease agreements.

Both received hundreds of thousands of dollars in leases and other state benefits during the Thompson administration. Cacciatore is also the director of a street sweeping company that has been awarded $40 million in state highway contracts since 1970, when Cellini was transportation director.

But Cellini, in a deposition, said that though he met with Cacciatore and Antoniou, it was only a social meeting.

Cacciatore testified that his knowledge of the state's intention to lease was deductive, not the result of insider information. He said he approached Antoniou about a lease of the Sears store after an extensive survey of available office space in the Loop pointed to the Sears building, said Michael McCormick, an attorney for Antoniou.

Cacciatore's lawsuit against Antoniou for the fees was assigned to Judge David Shields, the former presiding judge of the Cook County Circuit Court's Chancery division.